The men and women in the U.S. armed forces protect our country every day. To protect these service members and their families from predatory lending practices, Congress passed the Military Lending Act (MLA) in 2006. At that time at least 17% of uniformed personnel used payday loans with fees equal to 400% APR or higher.1 The MLA forbids lenders to:
- Charge more than 36% APR
- Secure loans with a personal check or access to a bank account, title, personal vehicle, or military allotment in certain situations
- Charge prepayment penalties
- Issue rollovers, renewals, refinancing, or consolidations on deferred presentment/payday loans unless the renewal was at better terms for the borrower
Last year the Department of Defense declared a Final Rule Amendment to the act, expanding coverage and helping close loopholes. The Final Rule incorporates significant changes to the original MLA law regarding eligibility, MAPR, and broader coverage, extending the protections of the MLA to all forms of payday loans, vehicle title loans, refund anticipation loans, deposit advance loans, installment loans, unsecured open-end lines of credit, and credit cards.
These changes will have serious implications for lenders, as failure to comply with MLA regulations beginning October 2016 (in most instances) can mean both civil and criminal penalties. If your institution offers products and services to military members and their families, the compliance process will likely require an extensive review of internal controls and risk management procedures. But rest assured that you have options.
So that you can better understand the scope of the Military Lending Act as it applies to financial institutions, your options, and steps you can take to ensure compliance, plan to attend our Military Lending Act webinar where we’ll share details on how TransUnion can help you can comply.
Jason Laky is the business leader for consumer lending and auto finance within the TransUnion Financial Services vertical, and oversees the business strategy, market planning, business development and financial performance of the automotive and consumer lending sub-verticals. To contact Jason, please email firstname.lastname@example.org.
1Department of Defense Report on Predatory Lending Practices Directed at Members of the Armed Forces and Their Dependents. August 9, 2009